I always wondered how China had avoided the slums that seem to dominate the large cities of other developing countries. When I started my research for this book, I heard that China was concerned about “Latin Americanization” — meaning megacities, inequality and instability. At the same time, the government was abolishing agricultural taxes that had been collected in some form for over two and a half millennia. These developments seemed important to understand.

In your book you describe how China escaped the usual social unrest that accompanies preferential policies for cities thanks to its hukou, or household registration, system.

China’s household registration system separates its rural and urban populations. While those born in cities have a local hukou that gives them access to social services, those born in the countryside have a harder time getting access to services when they migrate to cities.

Most poor countries favor cities to promote development and ensure that people living in cities are pro-government. I argue that this kind of “urban bias” might tamp down protests today but also encourages more and more farmers to move to favored cities. These large cities, often full of slums, can explode. Urban protests can quickly overwhelm regimes, even seemingly stable ones like Mubarak’s in Egypt. China’s hukou system is a loophole to this Faustian bargain: favoring urbanites while keeping farmers in the countryside and smaller cities.

China is experiencing an urban revolution, powered in part by hundreds of millions of migrant workers. Faced with institutionalised discrimination in the housing system and the lack of housing affordability, migrants have turned to virtually uninhabitable spaces such as basements and civil air defence shelters for housing. With hundreds of thousands of people living in crowded and dark basements, an invisible migrant enclave exists underneath the modern city of Beijing. We argue that in Chinese cities, housing has been adopted as an institution to exclude and marginalise migrants, through: (a) defining migrants as an inferior social class through the Hukou system and denying their rights to entitlements including housing; (b) abnormalising migrants through various derogatory naming and categorisations to legitimise exclusion; and (c) purifying and controlling migrant spaces to achieve exclusion and marginalisation. The forced popularity of basement renting reflects the reality that housing has become an institution of exclusion and marginalisation. It embodies vertical spatial marginalisation, with exacerbated contrasts between basement tenants and urban residents, heightened fear of the ‘other’, even more derogatory naming, and the government’s more aggressive clean-up of their spaces. We call for reforms and policy changes to ensure decent and affordable housing for basement tenants and migrants in general.

Based on a comparative study of New-Pudong (East Shanghai) and Old-Puxi (West Shanghai) in their respective ability to absorb rural migrants, the very essence of urbanization, this paper finds that, constrained by the current hukou (household registration) system and land tenure system, although New-Pudong has emerged as one of the most modernized urban areas in the world, it did so under an urbanization model that is government-dominant and characterized by high land-intensity and capital-intensity. This model represents a serious mismatch in terms of China’s factor endowment that is characterized with a large but relatively poor rural population. In sharp contrast, guided by the market mechanism under private land ownership and free migration, Old-Puxi emerged as an urbanization model that was very adaptable to China’s factor endowment and stage of development. Therefore, as a model of endogenous urbanization, Old-Puxi is more efficient and inclusive, at the same time more sustainable economically and environmentally, and for this reason more applicable to China at a time when China needs to urbanize most of its rural population urgently to avoid the further worsening of the rural/urban divide and income disparity.

The July 2014 Chinese State Council circular on the “end of the hukou (household registration) system” has been greeted by a mixture of jubilation and scepticism in the press. The abolition of the distinction between rural and urban Chinese citizens, which has existed since the 1950s, is historic, and may be of symbolic importance, but much of the rest of the policy announcement is neither new nor likely to benefit most current and prospective rural-urban migrants. Real hukou reform will be difficult and costly, and remains a long way off.

When China’s State Council announced in late July that it would end the official division of Chinese residents into rural and urban, it ended a practice that for almost six decades represented the worst of the country’s oft-decried residence permit, or hukou, system. When introduced in the late 50’s the restrictive policy bifurcated Chinese into an urban minority with government-provided benefits and a rural majority expected to feed both cities and itself.

Today over half of China’s population already lives in the cities. A blueprint for the country’s urbanization announced in March plans for 60% of the population to be urban by 2020, meaning another 100 million Chinese will move to cities. The plan also calls for 45% of the population to have urban hukou, meaning another 250 million once-rural residents will need to be registered in cities. This would theoretically entitle them to better benefits in areas such as health care and education.

The State Council provided general guidelines in its recent announcement on how the central government wants urbanization to proceed: few to no residency rules for those migrating to smaller cities, and increasingly stringent requirements as urban populations pass the 1 and 3 million marks. Cities with over 5 million people can use a “points” system to decide who is accorded residence, a practice already used by larger cities like Beijing that weeds out the vast majority of hukou hopefuls in favor of high-earning or highly educated applicants.

Wen, Guangzhong James and Xiong, Jinwu (2014). The hukou and land tenure systems as two middle income traps : the case of modern China. Author’s post-print. Final version published in Frontiers of Economics in China 2014, 9(3): 438-459. DOI: 10.3868/s060-003-014-0021-1.

China’s prevailing hukou (household registration) system and land tenure system seem to be very different in their applications. In fact, they both function to deny the exit right of rural residents from a rural community. Under these systems, rural residents are not allowed to freely exit from collectives if they do not want to lose their entitlements, such as their rights to using collectively owned land and their land-based properties. Farmers are neither allowed to sell their houses to outsiders, nor allowed to sell to outsiders their rights to contracting a piece of land from the collective where their households are registered. For migrant workers from rural areas, it is extremely difficult for them to obtain an urban hukou with all its associated entitlements at an urban locality where they currently work and live. The combined effect of the two systems leads to serious distortions in labor and land markets, resulting in discrimination against migrant workers, sprawling yet exclusive urbanization, housing bubbles, and depressed domestic demand. These distortions further entrench the existing and much widened urban/rural divide. Unless these two systems are thoroughly reformed, the rural residents in Chinese mainland will be trapped in their comparatively much lower income and remain unable to share the gains from the agglomeration effects of urbanization.

Related

Wen, Guangzhong James and Xiong, Jinwu (2013). Which type of urbanization better matches China’s factor endowment: a comparison of population-intensive Old Puxi and land-capital-intensive New Pudong. Frontiers of Economics in China, 2013, 8(4): 516-534.
Full text available at publisher’s website.

The East Asia Forum published an article on urbanisation in China. By Wang Xiaolu, published on 12 May 2014, accessed on 13 May 2014.

China is experiencing rapid urbanisation. It is the main engine of economic growth in contemporary China, although it is facing some severe challenges. A major problem is that the majority of the 234 million rural migrants in urban areas have not obtained urban permanent resident status, blocked by the hukou or urban household registration system. The newly released urbanisation blueprint by the Central Committee of the CPC and the State Council, National New-Type Urbanization Plan 2014-2020, announced the acceleration of the process of turning rural migrants into urban citizens.

Farmers enjoying tea at a local teahouse in Yongchuan district (永川区), Chongqing. Photo taken during a field trip to Chongqing in November 2013.

The dual citizenship and property system in China has forged the collective rural identity. Having a rural hukou provides some benefits, especially concerning rural land rights. However, this rural, or farmer’s, identity constitutes a barrier for many migrant workers who have been living in urban areas, some for decades. In many places, the hukou has been relaxed, but in large cities like Beijing or Shanghai restrictions are still in place. There is little doubt that the lack of a local resident permit presents an obstacle for integration and identification with the host city. Migrant workers continue to have a preference for marrying their peers from the country. Very often, one can hear them making plans to go back to their hometowns after they retired. But, what seems more peculiar to an outsider is to learn that many still call or consider themselves farmers. According to the (English) dictionary, a farmer is a person who owns or manages a farm, or cultivates land. However, in China it has a very different meaning: it is a social class. It refers equally to those who engage in the farming industry and those who work in the city but possess a rural residence permit. Actually, the (usual) Chinese name for migrant workers does not contain the word “migrant” but “farmer” (nongmin-gong – 农民工). In fact, it also includes the fellows who joyfully sip at their tea in the photo, but whose industry is alien to the writer.

Abstract
China’s new leadership has called for the realization of “Chinese dream” of reviving the national strength and glory. As the country enters the urban age, a critical part of the Chinese dream is the “urban dream” – the promotion of urbanization to generate household consumption to put the economy on a sustainable footing. Yet a third of the 700 million Chinese urban dwellers today are not truly “urbanized”. They are the migrant population, who do not have an urban hukou, or household registration. To accomplish real urbanization, migrant workers need to become full urban residents. That requires offering them an urban hukou with the aim of ultimately abolishing the hukou system altogether. In this talk, Prof. Kam Wing Chan outlines a proposal to phase out the hukou system in 15 years.

This seminar will be held in English.
Sebastian Veg, Director of the CEFC, will chair the session.